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By Tom LindmarkThu, 01 Jan 2015 02:02:18 +0000en-UShourly1http://wordpress.org/?v=115butthenwhat/ELKMhttps://feedburner.google.comIs This The Last New Year’s Eve Of Uber Surge Pricinghttp://feedproxy.google.com/~r/butthenwhat/ELKM/~3/rxOAXnTQn4g/
http://butthenwhat.com/2014/12/31/is-this-the-last-new-years-eve-of-uber-surge-pricing/#commentsThu, 01 Jan 2015 02:02:18 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8903Timothy B. Lee offers several defenses of surge pricing by Uber and Lyft, including this.

It might seem like an obvious point, but it’s often overlooked by people who complain about surge pricing. Surge pricing gives drivers an incentive to spend more time on the road than they otherwise would. It encourages them to re-arrange their schedules to make sure they’re available on nights of peak demand. And it entices drivers who might otherwise like to go out partying themselves on New Year’s Eve to hit the road instead.

I haven’t been able to find any hard data on how much higher prices increase the number of drivers on the road — a measure economists call the elasticity of supply. But there’s reason to believe that big price increases will be more powerful during nights of predictably high demand — like Halloween or New Year’s Eve — than at other times.

If demand spikes unexpectedly, there might be a limit to the number of people who can immediately jump in their cars and help out. But everyone knows New Year’s Eve is the biggest night of the year for taxi service. Lyft has been sending me emails all week reminding me that I could make a lot of extra money if I drive tonight. So people who need some extra money have plenty of time to make the necessary arrangements.

So, to his credit, he admits that there is no data supporting surge pricing as a means of enticing ride share drivers onto the road but suggests that surge pricing incentivizes drivers to come out. The point he elides is that it is just as likely that drivers will come out on nights like New Year’s Eve whether there is surge pricing or not. The sheer volume of ride requests guarantees more business than they can adequately serve, and consequently a profitable evening. It is not surge pricing which allows just about every taxi company in major metropolitan areas to lease all of their cabs with ease on nights such as these.

To an extent the success of Uber has been driven by pricing its service substantially below the local taxi market prices. Its ability to do so derive from a substantial venture capital funded war chest as well as evasion of costly local regulations (the appropriateness of that evasion is a subject for another post). Uber’s price competition does saddle its drivers with a structure which compensates them at a level which allows for simply minimal profitability. Surge pricing is the variable which boosts drivers’ take to acceptable levels. Without it Uber might find it difficult to continue to attract and retain drivers.

To put it another way, surge pricing has nothing to do with enticing drivers to offer their services during busy periods. It is an excuse which Uber uses to overcharge for rides in order to bring the total compensation of drivers to a level whichwillensuretheir continued participation with the company. It’s not necessary on New Year’s Eve but it can be spun as such in order to achieve a different objective.

The problem Uber faces is consumer resistance to surge pricing. Not that riders will refuse to use their service; rather they are becoming educated and will simply arbitrageamong transportation providers for the lowest cost rather than simply punching up a ride on Uber. As taxi companies respond to Uber’s challenges and offer their own apps the ability to choose between price and convenience becomes much easier and Uber’s ability to offer its drivers the extra compensation from surge pricing is diminished. Among other challenges facing Uber will be its ability to replace the lost surge pricing income with higher fares and the concomitant effectthatwill have on their attractiveness to taxi service.

Uber isn’t going away but surge pricing is, and that represents a significant challenge to the company’s business model.

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http://butthenwhat.com/2014/11/30/a-different-view-on-oil-prices/#commentsSun, 30 Nov 2014 16:19:04 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8897Sober Look presents a different take on the effect of lower oil prices on US oil production than I did in my post yesterday. They quote Scotiabank suggesting that the Bakken and Permian Basin fields are producing below break even based on current prices, while Eagle Ford is still in the black. They posit slowing drilling activity and tighter credit for independents if these prices hold. I don’t think it’s unreasonable to expect a bit of the froth to go out of the US E&P market, but I doubt that at current levels any effect is going to be other than on the margins.

Interestingly, Sober Look postulated that oil prices might get a temporary boost at least domestically if the government should choose to add to the Strategic Petroleum Reserve. Such a move would present a difficult choice for an administration committed to renewables and clearly hostile to fossil fuel production. On the one hand, lower oil prices and the consequent depressing effect on production would be welcome by its enviornmental base, while lower oil prices strain the economic arguments in favor of wind and solar. Oh, and lower oil prices certainly don’t do much to dampen the American love affair with SUVs and pickups. Overall, I doubt that any attempt to boost prices will be viewed as a viable political alternative.

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http://butthenwhat.com/2014/11/29/us-oil-production-will-be-fine-with-lower-prices/#commentsSat, 29 Nov 2014 23:44:01 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8894Before Monday rolls around and the analysts start talking their book at CNBC and elsewhere, take a look at this short article on oil prices from Market Watch.

Moreover, this supposed floor reflects the “full cycle costs” of production, they said, arguing that this overlooks the fact that many producers in North Dakota, Texas and elsewhere have already acquired acreage, contracted rigs and even hedged crude prices.

“We think what counts at this stage is half-cycle costs,which are in the significantly lower band of $37 to $45 a barrel. This means that the floor is falling and may not be nearly as firm as the Saudi view assumes,”

There is probably no commodity or industry of of which the death of all or parts of it have been so routinely predicted and so consistently wrong. Most of the time the so-called experts overlook or don’t understand the technology of the industry, particularly the advancements in exploration and production. Someday, no doubt, someone is going to be right and the industry willfade away. You and I will be long forgotten when that happens.

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http://butthenwhat.com/2014/11/29/chasing-our-tails/#commentsSat, 29 Nov 2014 22:20:49 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8891Though it’s not of great import, this story about the ACA conflicting with Americans with Disabilities Act is too good to pass up.

The Cliff Notes version is that the ACA allows companies to offer financial incentives to employees who participate inworkplace wellness programs. You know, obesity, smoking cessation programs, etc. The quid pro quo to the financial incentives, which can amount to thousands of dollars, is that participants are monitored and tested to make sure their claims to abstinence are true. Well, that runs headlonginto the American with Disabilities Actwhich says you can’t make medical inquiries of employees unless its job related or part of a voluntary wellness program.

Your reaction is probably the same as mine. What’s the big deal sinceno one is forced to enter the wellness programs, no harm, no foul. The Equal Employment Opportunity Commission, however, takes a different and decidedly dimmer view. Intheir universe the fact that participation involves significant financial awards obviates the voluntary nature of participation and hence violates the law. Ergo, they’re suing Honeywell and a couple of smaller companies for essentially complying with the ACA.

We probably need a new cabinet level department to adjudicate diametrically opposed elements of legislation and regulation designed to make our lives better.

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http://butthenwhat.com/2014/11/07/is-government-employment-shrinking/#commentsFri, 07 Nov 2014 18:55:38 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8885The WSJ Real Time Economics blog, hereafter to be known as the WSJ-RTE blog, attempts to make a case for a shrinking federal government workforce. Their graph of federal employees would seem to validate that claim.

Now, that’s not the only governmental unit which employs people. The states and local municipalities also chip in and there the picture is a bit different.

Does anyone think that block grants from Washington might have something to do with this? Perhaps Washington learned a lesson about out-sourcing from industry. But the article does try and put a happy face on the growth in the states and local governments by noting that as a share of the total workforce government employment at all levels is declining.

This, of course, is a fine example of the old axiom that no tree grows to the sky.

The article concludes by attempting to explain the contradiction of an historically high level of government spending as a share of the economy with a declining level of employment as a function of increasing transfer payments. The author then concedes that there might be another factor at work.

Another reason government spending as a share of GDP remains high, even though the workforce has shrunk, is that government contractors — who may work primarily or entirely on projects for the federal government — are not counted as federal employees.

Which leaves us with the question, “How many government contractors are there?” I googled around a bit without finding a satisfactory answer, though what I did come across indicated that this might indeed be a big number. I suppose the best takeaway is to conclude that government employment data comes from government and they don’t have a vested interest in inflating the size of their workforces; we don’t have any handle on the size of their outsourcing; and it’s best to trust our instincts about the size of the leviathin absent all the data.

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http://butthenwhat.com/2014/10/28/ebola-mindlessness/#commentsWed, 29 Oct 2014 03:00:17 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8881This has to go down as one of those “what were they thinking moments”

The “purpose” of the memo states: “Come to an agreed State Department position on the extent to which non-U.S. citizens will be admitted to the United States for treatment of Ebola Virus Disease.”

The document goes on to discuss – and advocate for — devising such a plan. The memo recommends that “State and DHS devise a system for expeditious parole of Ebola-infected non-citizens into the United States as long as they are otherwise eligible for medical evacuation from the Ebola affected countries and for entry into the United States.”

Do read the entire story as well as the link to the memo if you have time. In fairness, State was attempting to provide assistance to local citizens of the Ebola affected regions who are US government contractors. Still, as a matter of simple politics, particularly a week before an election and in a nation clearly nervous about the disease and its spread, this has to rank as one of the more inept moves ever.

It would be easy to suggest that this is just another example of an administration which cannot get out of its own way, but that would be shooting fish in a barrell. I think it’s a perfect example of a government which is so bloated and so in search of anything to justify much of its unnecessary apparatus that it runs amok in this manner. There is little to fear in this silly exercise, but that doesn’t mean the next time these people won’t do real harm.

Sales of new single-family houses in September 2014 were at a seasonally adjusted annual rate of 467,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.2 percent (±15.7%)* above the revised August rate of 466,000 and is 17.0 percent (±20.6%)* above the September 2013 estimate of 399,000.

So the September numbers were kind of blah, but the good news is that despite downward revisions August was a very good month as sales were up 15.3% from July which was also revised down. Still with me? If so let me make a suggestion, ignore these numbers, they’re bad guesstimates. Here’s the WSJ Real Time Economics blog on the subject”:

The Commerce Department’s monthly estimates tend to be volatile, often are revised significantly and typically come with enormous margins of error. Sales rose 0.2% in Septemberfrom the prior month, the latest report said. But that figure came with a margin of error of 15.7 percentage points.

So it could be up 15.9%, or down 15.5% — your guess is as good as ours.

August was a good month for new-home sales. They rose a robust 15.3% from July. But the initial estimate of sales (reported a month ago) at a seasonally adjusted annual rate of 504,000 was revised down this month to 466,000.

The month still saw a solid gain, because July and June numbers were revised down. But the 15.3% gain came with a margin of error of 16.3 percentage points. So sales could have been up a tremendous 31.6% — or down 1%. Take your pick.

No need to belabour the point, so let’s take a look at the bigger picture which isn’t pretty. To find a year in which new home sales were lower than the current run rate, excluding the 2008 recession years, you have to go back to 1982! Oh, and as the WSJ points out in 1982 interest rates were at 15%, unemployment was over 10% and the US population was 232 million versus 315 million now. Take a look at this graph from the St. Louis Fed for a better feel as to just how woeful the business of building new homes has become.

I know that everyone has his pet theory about what’s wrong – demographic shifts, income inequality, student loans, tight credit and on and on. All valid and logical arguments, yet the 80′s, and for that matter other periods after recessions, also involved headwinds which didn’t deter strong rebounds. This time it’s different and the reason(s) aren’t that obvious. Based on the duration of past upticks in construction, it looks as if time is running quite short to get back to historical norms.

As you no doubt know, various government agencies have moved the ball pretty far down the field with respect to loosening down-payment requirements for loans from Fannie and Freddie. The return of the 3% down mortgage seems to be pretty much assured. Arnold Kling offered this with respect to a Calculated Risk post on the availability of mortgage credit.

Is mortgage credit too tight?–Calculated Risk.

Not by the standards currently set by politicians. If you tell banks you have zero tolerance policy for making type I errors (making loans that eventually default), you have to expect many type II errors (passing up good loans). Of course, 10 years ago, the political pressure was the opposite.

The standards to which he refers are the multibillion dollar fines levied for past mortgage origination sins. Banks naturally took these actions as a not so subtle clue to tighten loan standards. We could differ on the reasons the fines were imposed but the political class has at least given lip service to the idea that a return to the old regime was unacceptable. In essence they profess to have learned their lesson well – until now.

Consider these two graphs. The first one shows the relationship between credit availability, or perhaps more appropriately relative looseness of standards, to mortgage delinquencies. You can overstate the correlation in this data, demographics, interest rates and consumer psychology likely played a big part in this disaster, but the easy availability of credit was certainly a contributing factor. . I do wish I could find an HCI which went back further as a comparison to today’s lending standards, but this is all I have or could find.

The second graph traces the performance of median home prices since 1970. Notethat the dips have been just that, blips, not catastrophic crashes save for what began to transpire in 2006. The point being that real estate cycles, particularly as they relate to single family homes are typically very long.

So to Kling’s observation that the politicians have pushed banks towards tight standards in an effort to avoid type I errors, I doubt that they know the difference between type I and type II errors. The fines and posturing were merely grabs for money and a means of directing blame towards the financiers (not to say that they weren’t culpable) and away from the policy errors which contributed to the debacle. Politicians and the real estate industry, including the financial sector, are well aware of the second graph. They know full wellthattoday’s laxity is unlikely to come home to roost for a long, long time, while the rewards politically and financially come with little risk, at least for the current participants. Certainly, this is just the first step back down the same tired old road and another disaster will ensue, but the risk of error right now is passingly small, the rewards large and the eventual disaster a problem for someone else.

The U.S. is addicted to the 30-year fixed-rate mortgage. It’s a financial product which is non-hedgeable and thus exists solely via the use of the government’s balance sheet. Absent abandonment of it, the extension of mortgage credit and the terms which accompany those loans is going to be subject to political whims and those whims will inevitably be slanted towards easy credit.

1.Sorry this ran over into the marging. Going to have to work with my tech guy on how to avoid this. If you want to give me free advice feel free to do so.

Of course that still leaves you with the question of how to do quick one-handed tasks on the go. The ideal thing, really, would be to pair the large phone with some kind of device that’s truly optimized for quick glances. Something that’s even easier to access than an item carried in your pocket. Something strapped to your wrist maybe. In other words, while last month’s Apple super-fan sported a laptop, an iPad, and iPhone the company’s dream customer of the future will have a laptop, an enormous phone, and an Apple Watch. And the fact that the Apple Watch looks so much classier and better than the Android smartwatches on the market is going to give Apple a whole new boost of competitive advantage, even as the playing field in phones levels.

I suppose that there exist not a small number of Applesters who will deck themselves out in the manner Yglesias describes. Still it seems a stretch to suppose that this represents the market for several reasons.

The universe of users who are going to shell out two to three thousand dollars for Yglesias’ configuration is not large.

The market for smart watches is nebulous at best. Yes, Apple’s watch is stylish but it suffers from the same usability issues as the Androids and just like them has to be recharged at least daily. It will be interesting to see in a year or so how many smart watches of any sort are collecting dust in drawers.

The pure tablet market is not a growth market. Sales have leveled off and there isn’t any app on the horizon which would drive an uptick in sales. It would appear that consumers are content to split their usage between regular sized phones and laptops rather than throwing a tablet into the mix.

The introduction of the tablet laptop hybrid adds a new dimension. While admittedly not perfect they’ve come a long way and it seems reasonable to assume the hybrids will evolve to a more satisfying product. If consumers do move to this product then the regular sized phone would appear to be the default option. Actually, it’s a bit puzzling that Apple hasn’t jumped into this space though it would canabilize their tablet and plus size iPhone 6.

By all accounts the new Apple products are doing exceptionally well, notwithstanding the bending and operating system issues. The company is still a world class designer, manufacturer and retailer of exceptional products. They just have a lot more competition and it is unlikely, at least as I see it, that they have somehow created a new ecosystem for the application of smart devices.

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http://butthenwhat.com/2014/09/23/how-long-do-you-want-to-live/#commentsTue, 23 Sep 2014 17:47:15 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8854How long do you expect to live? How hard are you going to work to extend your life span? Have you even thought about the subject? Well Ezekiel Emanuel has and he offers his conclusions in this Atlantic article.

Seventy-five.

That’s how long I want to live: 75 years.

…But here is a simple truth that many of us seem to resist: living too long is also a loss. It renders many of us, if not disabled, then faltering and declining, a state that may not be worse than death but is nonetheless deprived. It robs us of our creativity and ability to contribute to work, society, the world. It transforms how people experience us, relate to us, and, most important, remember us. We are no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.

There is much more to the article than the simplistic philosophy of the preceding paragraph. Emanuel, a noted physician, offers arguments that Americans while living longer are doing so as sicker individuals.

It is true that compared with their counterparts 50 years ago, seniors today are less disabled and more mobile. But over recent decades, increases in longevity seem to have been accompanied by increases in disability—not decreases. For instance, using data from the National Health Interview Survey, Eileen Crimmins, a researcher at the University of Southern California, and a colleague assessed physical functioning in adults, analyzing whether people could walk a quarter of a mile; climb 10 stairs; stand or sit for two hours; and stand up, bend, or kneel without using special equipment. The results show that as people age, there is a progressive erosion of physical functioning. More important, Crimmins found that between 1998 and 2006, the loss of functional mobility in the elderly increased. In 1998, about 28 percent of American men 80 and older had a functional limitation; by 2006, that figure was nearly 42 percent. And for women the result was even worse: more than half of women 80 and older had a functional limitation. Crimmins’s conclusion: There was an “increase in the life expectancy with disease and a decrease in the years without disease. The same is true for functioning loss, an increase in expected years unable to function.”

The eventual demise of the NFL isn’t going to come as the result of players abusing women, getting busted for drug possession, endangering children or any other desultory offense; it’s going to come as the result of this:

The National Football League, which for years disputed evidence that its players had a high rate of severe brain damage, has stated in federal court documents that it expects nearly a third of retired players to develop long-term cognitive problems and that the conditions are likely to emerge at “notably younger ages” than in the general population.

Just how big is the difference between NFL players and the general population. Well the NYT article paints a pretty gruesome picture.

Their calculations showed that players younger than 50 had an 0.8 percent chance of developing Alzheimer’s or dementia, compared with less than 0.1 percent for the general population. For players ages 50 to 54, the rate was 1.4 percent, compared with less than 0.1 percent for the general population. The gap between the players and the general population grows wider with increasing age.

Keep in mind that we’re at the front end of research into the effect of concussions and other types of sports brain injuries on participants. Next to nothing is known about the cumulative effect of brain trauma beginning with early participation in sports in which it may occur. In fact, that NFL players experience such profound effects hasn’t ben shown to occur as a result solely of their participation at the professional level. It just happens to be the most convenient deep pocket to (justifiably?) reach into, and the most proximate activity with which to link cause and effect. Unknown, at this point in time, is if individuals who participate in football and other high contact sports but who do not go on to play in the pros might not be subject as well to similar increased risks.

I enjoy watching football very much, though I tend to prefer the college game. Given the evidence, I don’t see how it survives in any form which resembles its current popularity. Concern about brain damage, whether warranted or not, among parents and potential participants, combined with a very fat liability tail aren’t conditions favorable to long-term success.

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http://butthenwhat.com/2014/09/07/8844/#commentsMon, 08 Sep 2014 03:20:58 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8844The next time you’re in line just let this little video make your wait a bit more comfortable.

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http://butthenwhat.com/2014/09/05/the-glass-half-emptyfull-employment-report/#commentsFri, 05 Sep 2014 18:14:50 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8839So, another monthly employment report and, depending mostly upon your political persuasion, either just a blip in an otherwise upward trend or further evidence of a stagnant, deteriorating economy. Personally, I tend to look on it as just a data point in an economic statistic which requires lots of data points to establish some version of reality. Here’s the BEA headline for anyone who didn’t crawl out from under a rock many hours ago:

“Total nonfarm payroll employment increased by 142,000 in August, and the unemployment rate was little changed at 6.1 percent, the U.S. Bureau of Labor Statistics reported today.
…
The change in total nonfarm payroll employment for June was revised from +298,000 to +267,000, and the change for July was revised from +209,000 to +212,000. With these revisions, employment gains in June and July combined were 28,000 less than previously reported.”

Basically the number came in well below the consensus estimate of 225,000 new jobs, but the trend is still up. The WSJ survey of economists’ reactions to the news is generally along the lines of “move along, nothing to see here.” A sample:

Looking at the year as whole after a long string of strong monthly payroll gains, a downside blip in the report can be excused as one of those things. We know too that zero new jobs in manufacturing, containing a 4,600 job decline in motor vehicles, is payback for the seasonally adjusted creation of such jobs in July because the factories never closed. We can also look to the flat change in hours worked, including overtime, and the steady 2.1% year-over-year increase in average hourly wages as indications the drop in payroll expansion is not about slowing growth. We could, but we also the think the main point of today’s report in the context of the year as a whole is it underscores our long-held view of growth without acceleration. –Steve Blitz, ITG Investment Research

Hmm, “growth without acceleration” isn’t exactly a scintillating concept, but I suppose it’s better than the alternative.

The WSJ also has some good graphs which show improvement in the duration of long-term unemployment and involuntary part-time work but unfortunately one which shows a continuing decline in labor force participation. They also feature this chart which is maybe the most depressing of all.

That sort of dynamic isn’t going to do the vast majority of the citizens much good beyond keeping their heads barely above the waves.

Finally, let’s put an end to the high fiving going on in some quarters concerning the length of the recovery in employment. As the WSJ points out that while the streak of 54 straight months of job creation is the longest dating back to 1939, it is also true that ranking recoveries of 12 months or longer over the past 75 years, this recovery ranks in in the bottom half of those 17 recoveries based on monthly job creation. Or put another way, this recovery still more or less sucks.

Of course, as I said in my opening comments, the reality construct is wholly dependent upon which way you happen to lean politically. At least, the facts suggest we’re muddling along in the proper direction.

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http://butthenwhat.com/2014/08/29/quadriceps-tendon-travails/#commentsSat, 30 Aug 2014 01:07:20 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8814I’ll get around to explaining the point behind the title of this post in just a moment, though it’s linked to my rather overlong absence from this blog. So far as the absence goes, it initially was intended to be break of a month or so, get some work done on other things and generally refresh. All pretty normal and then life, as it tends to do, took a turn I wasn’t expecting. Quite simply, at the end of March I hopped off a curb and to my amazement realized that my right leg, or more specifically my right knee had no intention of functioning in a normal fashion. In fact, it had no intention of functioning at all let alone supporting me. A trip to the ER confirmed that things weren’t at all right, in fact they revealed that somehow, someway I had ruptured my quadriceps tendon.

In short order, or at least after a wait of 6 hours or so in the ER I ended up on the acute care surgical ward and under the knife early the following morning. Afterwards,I found myself ensconced in something that looks very much like the picture below. Trust me when I tell you that the picture doesn’t come anywhere close to capturing the pain in the ass that this particular device, technically a knee immobilizer, inflicts on anyone unfortunate enough to be subjected to it.

All of which would have been fine had not the knee to which the tendon attached not been arthritic and not suffered some further deprivations as a result of the incident. Which is a long-form way of saying that I’ve now progressed to this:

So that’s occupied me somewhat, though it’s hardly an excuse for not posting a bit along the way. Rather continue to sit around and brood about my predicament, I’m going to put up a few posts and subject anyone out there who might still be following this modest Web site to more pearls of wisdom, albeit very small pearls.

So don’t count on competition to bring down prices in the broadband space. This is an area where the regulators — and only the regulators — can really be effective.

Ah, the enduring faith in the ability of government to lead us out of the wilderness and into a land of gigabit nirvana. Shall we count the ways that regulation has accomplished this feat, or should we count the ways it has led to sanctioned monopolies? Remember that one of the immutable laws of nature is that the regulated always capture the regulator, either through mutual interest in protecting relative turfs or “donations” to the politicians who oversee the regulator.

Two good, recent articles point out that the problem isn’t enough regulation, rather it’s regulation which accompanied the birth of broadband which stands in the way of delivering the amazing speeds which technology could provide to us. Andy Kessler in the WSJ and Jack Shafer at Bloomberg both make relatively the same point: Get the local governments who collect a fortune from the existing cable companies to cease excluding new entrants into their markets. Here’s Kessler:

Gigabit is in demand. Many cities, like Louisville, Ky., have invited Google Fiber but been turned down. Google didn’t like the terms. Even Mountain View, Calif., home of the Googleplex, reportedly declined to make the necessary concessions. Remember, most municipalities collect a kickback in the form of cable franchise fees (up to 5% of revenues) in exchange for the right of way. Hard to give that up. Citizens be damned.

The FCC can change this overnight. Instead of allowing municipalities to dictate onerous terms and laws that lock in (slow) incumbents, the FCC can mandate right-of-way rules similar to those granted Google Fiber to all credible competitors. If only the federal regulator would promote progress and focus on what’s best for the U.S. economy rather than for those it regulates.

It’s doubtful the Obama FCC will take up the challenge. Instead, last week it said it will introduce new rules to stop Internet providers from charging different prices for different content, like movies and TV shows on NetflixNFLX or Hulu. A U.S. appeals court in January threw out the FCC’s previous “network neutrality” rules as unconstitutional. Great, now a new set of convoluted net-neutrality rules that will limit incentives to run fiber.

Rather than subjecting broadband to further regulation in the interest of curing the bottleneck which regulation has created perhaps it’s time to try a different tack. There’s no reason to cut off the honey pot which municipalities have discovered in cable, simply open the market to competitors who might indeed increase their take. As Jack Shafer notes, the cable industry values its subscribers at about $4000 apiece. Google and other disrupters might see value at multiples of that number. Open it up and let the innovators and disrupters have a crack at the market. Regulation is always an option which can be taken on failure, it doesn’t always have to be the first option.

As an aside, given the FCC’s recently aborted attempt to gather information on the manner in which news organizations gather and disseminate news, do we really want to increase their sway over one of our primary channels of communication? Think about it.

It was also learned at a Congressional hearing Tuesday that CFPB officials are working with the Federal Housing Finance Agency on a second data-mining effort, this one focused on the 53 million residential mortgages taken out by Americans since 1998.¹

Once, the sole repository of massive amounts of sensitive data about the citizens of the US was the IRS. That agency, at least historically, accepted responsibility for probity and confidentiality with respect to the information in its computers. Indeed, employees of the IRS were and are subject to criminal penalties for the misuse of the data under their control. The standards to which they are held are much higher than those which are applied to other employees of the federal government. One can argue as to whether or not they might have lost their way a bit, become politicized and thus prone to misuse of the information they possess, but on the whole I think most Americans still view the agency with fear, yes, but also with a certain confidence that the data they yearly turn over to them remains out of reach of for the political class. Moreover, the IRS is subject to oversight by Congress as well as the executive branch and, though rare, breaches of trust when they occurred have tended to be viewed as truly beyond the pale.

The revelations of widespread NSA data mining of phone and internet communications produced an uproar which has led to at least token reforms, thanks to a light being shined on the NSA’s activities as well as Congressional oversight. Though Congress did not itself undertake any legislation limiting the activities of the NSA, their ability to do so forced the hand of the administration. No such pressure can exist to limit the reach of the CFPB. It is part of the Federal Reserve for which, properly neither the executive or legislative branches have oversight. Independence is essential for the functioning of a central bank but inimical to an agency which has the ability to affect the financial affairs of of the populace.

But let’s go back to the word I used to open this post – Why. Why does the CFPB need this information, what do they intend to do with it and perhaps most tellingly why do they need information on 85 – 90 percent of the active credit cards in the country when a smaller sample would suffice for modeling consumer behavior? It’s a simple question but nowhere have I seen an answer. It does seem to be important, really important since in the Congressional hearing CFPB Director Richard Cordray responded to this question in this manner.

“Would you object to getting permission from consumers, those people who you work for, before you collect and monitor their information?” Rep. Sean Duffy, R-Wis., asked Cordray.

“That would make it impossible to get the data,” Cordray replied.

Which is the sort of imperial response one would expect from someone secure in the knowledge that his interlocutors had no power to alter his plans.

This sort of data collection is troubling at any time, more so when it is undertaken by a government entity not subject to control. In a representative democracy an agency like the CFPB has no business existing outside the normal bounds of oversight and control. Frustrating as it may be at times, the US system of governance has served our needs admirably. No other ruling contrivance has guaranteed and delivered the sort of privacy and immunity from governmental intrusion into private affairs as has our system. The CFPB is an outlier born in a period of legislative frenzy. It’s mission may be worthy, but it needs to be conducted under the same sort of control which we demand of all other functions of government. Its overreach in this instance validates that need.

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http://butthenwhat.com/2014/02/07/ignore-this-months-employment-report/#commentsFri, 07 Feb 2014 16:59:24 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8793Another month, another jobs report. According to economists the report is bleak, adversely impacted by weather, full of unseen positives and, of course, going to either cause the Fed to delay tapering or stay the course. Given the fact that the reliability of the data is tenuous at best (the payroll survey and household survey show contradictory trends) any conclusion about the import of the report has as good a chance as any other of being either right or wrong. Here’s the best advice I’ve seen today.

We suggest looking at 12-month average trends in the household survey because of the monthly volatility in the report and we note that the number of unemployed has dropped by 2.1 million since January 2013, while employment has risen by 1.8 million. This suggests the drop in the unemployment rate from 7.9% to 6.6% is not just a result of falling participation. –RDQ Economics Chief Economist John Ryding and Senior Economist Conrad DeQuadros

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http://butthenwhat.com/2014/01/21/laszewski-on-the-recent-obamacare-data/#commentsWed, 22 Jan 2014 01:25:36 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8789If this keeps up there won’t be a “death spiral.” Heck, so far the insurers are just re-enrolling their old customers at higher rates! Robert Laszweski

That’s Laszweskis’s reading of the latest ObamaCare enrollment numbers. As usual, his most recent post is the best place to get informed, non-partisan data and analysis of this ongoing train wreck.

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http://butthenwhat.com/2014/01/18/back-to-blogging-2/#commentsSun, 19 Jan 2014 01:26:03 +0000Tom Lindmarkhttp://butthenwhat.com/?p=8787Well, it’s been a rather nice extended Holiday hiatus from the keyboard. Don’t ask why I’ve neglected to communicate with my meager audience because I don’t have any sort of good answer. Just lost the itch for awhile, and let’s face it, things have been somewhat boring. Seriously, how much can you say about inequality, the minimum wage, NGDP, ObamaCare and the latest JP Morgan fine. Too much if you base it on my reading history. So, while I do have a couple of things to say about those subjects, I’ll spare you more boredom this evening.

I do want to point you to two really outstanding posts. Both should engender some introspection, so don’t just breeze through and not think about what they’re saying.

The first is by the Felix Salmon. He does what he does best, take a complicated subject and explain it simply. In” Why Quants Don’t Know Everything” he analyzes the rise of the quants and explains the potential, limitations and perils of Big Data. If you haven’t already read it, I recommend you start with his earlier essay, “The Formula That Killed Wall Street.” They’re both masterpieces.

The other is Tim Carney’s tribute to Tom Coburn. I’m not sure it was meant as a tribute but that’s the way it read to me. Coburn’s departure from the Senate represents a loss for both sides of the aisle, but be sure to read to the end in order to appreciate the man’s integrity as opposed to the craven behavior of his contemporaries.